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What I Learned from a Billionaire: Part 2

If you want to succeed in business, you should study this man’s work. It was no accident that he amassed a personal fortune of $100 billion dollars. Walmart has become a worldwide business thanks to his drive and entrepreneurial tactics employed during his tenure.

Sam Walton is considered the greatest entrepreneur of the 20th century. In his autobiography, “Made in America,” he shares insight and experiences that allowed for him to build his iconic brand.

Learn to Value a Dollar

Walton learned how to organize Walton Enterprises into a partnership from his wife Helen’s family farm business. Each of the family members had a partnership status with regular payouts and voting rights as well as a vested interest in the family business.

Over the years the Waltons accumulated wealth through this partnership by starting humbly with anything they could save to where they eventually compounded a fortune in Walmart stock in the partnership. Mr. Sam, as his associates affectionately referred to him, reflects by saying, “we accumulated funds in enterprises rather than throwing it all over the place to live high.”

For those of us who do not have a family business partnership there is still the option of investing in the stock market and participating in your company’s 401K program. Think of both avenues as excellent wealth building tools to build your own “enterprise.”


Using Scale to Your Advantage

 During Walmart’s early stages, Walton and his associates would often travel around Bentonville Arkansas to size up the competition’s prices. Through this process he found what he calls “the essence of discount retailing.” That is, if your cost for an item is $0.50 and you price it at $0.75 you can sell three times as much of it than if you sold it at the competitor’s price of $1.00. Sam adds, “I might make only half the profit per item, but because I was selling three times as many, the overall profit was much greater.”

In other words, reasonably undercut the competition’s price and you should generate more total sales. Even though you sell more units with a lower profit margin per sale, the total profits will be far larger.


How to Bounce Back

Resiliency is a common trait among all successful entrepreneurs. Despite his unparalleled business achievements, Sam was no different from anyone else in experiencing his share of bad business decisions. Fortunately, he took a tactical approach to different revenue generating experiments.

David Glass, former President and CEO of Walmart, reflected by saying the following about Sam, “Two things about Sam Walton distinguish him from anyone else I know. First, he gets up every day bound and determined to improve something. Second, he is less afraid of being wrong than anyone I’ve ever known. And once he’s wrong he shakes it off and heads in the other direction.”

If you do not share Walton’s level of mental resiliency, being wrong can be a serious blow to your ego. Some people may even continue to defend their position just to prove a point, even though they know it is the wrong position to have. This is a terrible strategy for any entrepreneur.

Instead, emulate Walton and know that it is OK to be wrong, but not OK to stay wrong. As Sam said, “When someone made a bad mistake – whether it was myself or someone else – we talked about it, and then moved on to the next day’s work.


Learn to Swim Upstream

Walmart started humbly as a local family discount store with no clear edge among its competitors. Sam reflects on the hardships in building his company by stating that “after a lifetime of swimming upstream I am convinced that one of the real secrets to Walmart’s phenomenal success has been that very tendency. Many of our best opportunities were created out of necessity. The things that we were forced to learn to do, because we started out underfinanced and undercapitalized in rural communities, contributed mightily to how we’ve grown as a company.”

Further, Sam notes “one way we tried hard to make up for our lack of experience and sophistication was to spend as much time as we could checking out the competition.”

As an emerging entrepreneur, use you naiveté to your advantage by studying individuals who are where you want to be. Be innovative in solving the roadblocks in your path and drive forward through each one.


Make the Customer Number One

Contrary to what most entrepreneurs do, running a profitable business revolves around providing something of value to the customer. Too often business owners will provide something they like or think people need. Walton advises that “the secret of successful retailing is to give your customers what they want.”

Further, Don Soderquist, former Walmart Vice Chairman, adds “you have to focus on something the customer wants and then deliver it.” Simple advice that is often difficult to execute.

Additionally, Walton put customer service first as best as he could while managing Walmart’s exponential growth. He reflects by saying that “I think that getting out on the floor as a storekeeper and meeting every one of the customers are little personal touches that are so important for an independent merchant.”

If none of this advice resonated yet, take Walton’s next comment to heart as an entrepreneur. He states “job security lasts only as long as the customer is satisfied. Nobody owes anybody else a living.” Make the customer’s needs your priority!


Despite his unrivaled modern-day entrepreneurial success, Walton remained humble which may have been another key to the advance of Walmart. Take time to reflect on his advice and glean as much wisdom as you can from his experiences. Then apply it where you can in your personal life, investing, finances, and business.


As always, if you have questions or comments, feel free to send me a message. Thanks for reading.


John

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